They forgot a few zeros…

WASHINGTON/NEW YORK (Reuters) – Bank of America Corp (BAC.N) has been deemed to need as much as $34 billion in additional capital, according to the results of a government stress test, a source familiar with the results said on late Tuesday.

Bank of America spokesman Scott Silvestri declined comment.

A possible $34 billion capital shortfall is certain to increase the pressure on Chief Executive Kenneth Lewis, whom shareholders ousted as chairman of the largest U.S. bank last week.

The ouster could lay the groundwork for his eventual departure from the company he worked at for 40 years, including the last eight as chief executive.

It may also unnerve investors who had hoped the results of the stress tests on Bank of America and 18 other banks might show the industry was in less dire condition than had been feared. Shares of major U.S. banks have nearly doubled since bottoming out in early March.

U.S. equity market futures extended losses late on Wednesday and the yen gained following the news.

About 10 of the 19 banks being stress-tested are expected to need more capital buffers, a person familiar with the official talks has said. The person was not authorized to speak because the results are not public.

Many analysts have speculated that other banking companies that may need more capital, either because they do not have enough tangible common equity or are experiencing rising loan losses, include Citigroup Inc, Wells Fargo & Co (WFC.N), Fifth Third Bancorp (FITB.O), GMAC LLC (GKM.N), KeyCorp (KEY.N), Regions Financial Corp (RF.N) and SunTrust Banks Inc (STI.N).

CEO HAD SAID NO CAPITAL NEEDED

The government has spent three months conducting stress tests on the 19 largest U.S. banks to determine their revenue, losses and capital needs, should economic conditions deteriorate even further than many economists expect.

Officials plan to release results of the tests on late Thursday, and are expected to reveal both aggregate and individual banks’ figures.

Bank of America has been at the top of the list of banks believed to need more capital, as it is facing significant credit losses and a controversial takeover of Merrill Lynch & Co, which closed on January 1.

The $34 billion figure more than triples previously published reports of Bank of America’s capital needs.

Lewis had told analysts on an April 20 conference call that “we absolutely don’t think we need additional capital,” but added that credit conditions remained weak, especially in credit cards. “Make no doubt about it, credit is bad, and we believe credit is going to get worse,” Lewis said.

Bank of America that day reported a surprisingly large first-quarter profit, but much of the amount came from one-tine gains and an accounting change, which may not be repeated. The bank’s nonperforming assets surged 41 percent in the quarter to $25.74 billion.

The Federal Reserve and Treasury declined comment.

Most of the 19 U.S. banks being stress-tested intend to hold press conferences on Friday to explain the results of the government’s assessments, a source briefed on the plans said on Tuesday, adding that many of the banks are in the process of crafting capital recovery plans.

CAPITAL RAISING

It is not clear how Bank of America plans to raise the additional capital buffer.

Federal Reserve Chairman Ben Bernanke said on Tuesday that most of the capital-needy banks will be able to raise additional capital through “either issuance of new capital or through conversions and exchanges, or the sales of assets and other measures that would raise capital.”

Bank of America has received $45 billion of taxpayer money, including an emergency federal bailout that included $20 billion of new capital in mid-January, two weeks after the Merrill purchase.

Critics believe Lewis overpaid when he acquired Merrill for about $29.1 billion of common and preferred stock, agreeing to the takeover after less than 48 hours of negotiations and due diligence. Through Tuesday, shares of Bank of America had fallen 68 percent since the Merrill purchase was announced last September 15.

They also fault him for failing to back away from the purchase after realizing in December that Merrill’s finances were deteriorating fast, ultimately resulting in a $15.84 billion fourth-quarter loss.

Critics accuse Lewis of improperly failing to disclose Merrill’s losses, and also for allowing Merrill to pay some $3.6 billion of bonuses to its own workers even as losses were mounting.

Lewis has said under testimony he felt pressure from officials including Bernanke and former U.S. Treasury Secretary Henry Paulson to close the merger, so as to not upset the financial system. This, however, prompted criticism from law professors and governance experts who said Lewis owed a fiduciary duty to his shareholders, not his regulators.

Bernanke on Tuesday told lawmakers he did not pressure Lewis to withhold information from shareholders about problems at Merrill.

Bank of America is more heavily exposed to the U.S. economy than JPMorgan Chase & Co (JPM.N) and Citigroup, which are better diversified internationally. Analysts widely believe the government will not require JPMorgan to raise more capital.